Three Steps to Your Lowest-Cost Supply Chain

Michael Lee SerwetzPresident

Prophet Business Services

Are you restructuring your supply chain?

• Chances are you are restructuring, reorganizing, or planning one or the other, because—– The world has changed irrevocably since 2008– Costs are spiraling• RMB, INR, BRL, JPY and more• Material costs• Labor rates, esp China but all over

– Markets/Sales are not inspiring

If you are a typical company, how will you effect cost reduction?

• Cut Headcount• Close Offices/Locations• Consolidate• Reduce Benefits

Will it work? For how long?

• We have all experienced the nightmare of restructuring (in some cases repeated restructuring)

• In many cases, it can be counterproductive, by eliminating experienced staff, and burdening the remaining, resulting in:– Mistakes– Inefficiency– Actually increased cost and reduced effectiveness

What else can we do?

• First, ask yourself-Will the end result of my restructuring be how my supply chain looks in five years?

• If you cannot emphatically say yes, consider a solution that will surely lower cost, will not reduce effectiveness, and will be your supply chain of the future…

How?

• I have developed, over years of experience and study, a three-step roadmap to success in building the lowest cost supply chains. I can assure you that this methodology, if followed completely, will result in not only lowest costs, but effectively building your supply chain of the future.

First--

• Supply Chain Risk Management Assessment– Assess all 12 risk elements for each supplier– Create a metric for comparative ranking– Deliverable: A comprehensive resource list with

metric rankings– Narrow your supplier list– Focus on the best ones

Second--

• Work with each supplier on cost reduction– Labor use– Waste (actual waste such as energy and non-value

added-muda– Technology– Quality process (such as Six Sigma vs. AQL)– Process Flow– Logistics cost and efficiency (air freight time vs.

cost, container load %)

Third--

• Bionic Sourcing– First, set in place the best people, procedures,

communication– Then, you can cut from both the upper and lower

part of the pyramid, thus lowering cost without reducing effectiveness (perhaps increasing it as there are less links in the chain)

Please consider this.

• I am 100% certain that a well-thought out, well-executed plan as per above will result in significant, even dramatic reduction in your supply chain costs;

• And, an organization that will endure in today’s volatile environment.